Crushing Q4 EBITDA

“Can you believe it’s already September? Where did the summer go!” - 7 people last week

Indeed the year is flying by. Q4 means topline and efficiency pressures for marketers everywhere, but the stakes are especially high in DTC and eCommerce businesses, where the 4-day 7 day 30-45 day (!) BFCM period often makes up 25%+ of annual sales. Most of our clients have had BFCM sale plans locked for months at this point. Still, we’re consistently having conversations with clients about how marketing departments can help maximize EBITDA in Q4. To avoid falling back on the tired consultant truism, “it depends”, we’ll build out a (fictional) case study for a set of recommendations here.

Fictional Company Overview: Sofa So Good

• Team: Chase Longe (CEO), Otto Mann (CMO), Di Vann (Supply Chain), Reena Kleiner (CFO)
• Product: Sofas
• YTD Performance: At target for both topline and ROAS
• Q4 Goals: 1. Biggest BFCM ever; 2. Keep marketing spend < 20% of revenue
• Q4 Concerns:
  
  • Pull Forward Effect - The team is worried that pull forward effect from consumers anticipating tariff price increases has artificially lifted Q2 and Q3 performance
  • Consumer Uncertainty - The last Q4 with this level of consumer uncertainty was 2008, when Chase (CEO) lost an early career marketing job during the Global Financial Crisis
  • Inventories - After shifting some manufacturing from China to Vietnam in April, Sofa So Good is running low on inventory for their top selling SKU - a 3-seat traditional sofa called “The Sit-uation”

After a restful Labor Day Weekend, Chase (CEO) calls Otto (CMO) into his office and lays out the challenge: “Otto, we’ve been keeping our heads above water this year, but we have ambitious goals for Q4, and I’m concerned about tariffs and consumer demand. What’s your plan to nail BFCM?”

Luckily Otto has been thinking ahead, so he lays out the following three pillars that will help Sofa So Good crush their Q4. 

Measurement and Incrementality

Otto has long known that the last touch attribution system in use at Sofa So Good is not showing them the whole picture. He understands that it likely is inflating the contribution of lower funnel channels, like branded search, and discounting the value of top of funnel channels and tactics, like their UGC campaigns on Paid Social. In the past, Otto has kept this discrepancy in mind while making allocation decisions, but without any science behind it. Given the sense of urgency and uncertainty, he’s made the choice to change their approach. Specifically, he’s onboarded Haus as an incrementality testing partner to help Sofa So Good get as comprehensive a sense of real channel effectiveness as possible prior to November 1.

The team will run 6 tests between September 1 and November 1 (3 weeks per test, with 2 tests running simultaneously), concentrating on largest spending channels, and channels where Otto believes they might currently be overallocating spend. It’s not a perfect setup - ideally they’d have months or years of incrementality data so these pre-BFCM tests would serve as confirmatory or to make adjustments, but even a first round of testing can give Otto solid insights to improve BFCM spend allocation.

Optimizing Spend and Strategy

So what should Otto do with his incrementality testing results? Typically when we’ve seen net new incrementality tests there are a few obvious places to both increase and reduce spend, thereby driving more revenue with better efficiency. Double clicking on Sofa So Good’s current state attribution approach, heavily focused on last touch, our ingoing hypothesis would be as follows:

1. Reduce Brand Search spend. Last touch attribution tends to overcredit sources that cater to bottom-of-funnel, high-intent traffic like Brand Search (i.e., the customer entered “Sofa So Good” into Google, so they’re already quite likely to convert). Paying for branded results in highly competitive consumer categories usually makes sense, but going from, say, 85% to 90% share of search on a key branded term is usually past the point of diminishing returns
2. Increase Paid Social spend. On the flipside, last touch attribution tends to undercredit top-of-funnel, lower intent traffic, like the kinds of folks who might see an ad for Sofa So Good on their Instagram feed during the “consideration” phase of their customer journey. Increasing spend in these channels often leads to outsized returns that don’t show up in last touch attribution. This can be especially true as customers begin to consider what might be their big ticket purchases during BFCM

Tactical Planning

The final pillar of Otto Mann’s BFCM plan gets a little more into the weeds, focusing on: 1. Merchandising, and 2. Pricing.

For Mechandising, Otto gets together with Sofa So Good’s head of supply chain, Di Vann, to understand Q4 inventory levels and sales projections. For a primarily Chinese-manufactured company like Sofa So Good, 2025 has been an uncertain year from a product and supply chain perspective. While Di Vann spent most of Q2 in Vietnam working on standing up manufacturing there, they still haven’t been able to fully replace the Chinese capacity they pulled back from in April. Looking through Di’s projections, they observe that “The Sit-uation”, their top seller, is running low on inventory, and likely won’t be able to be kept in stock with the usual advertising push in November. They identify another strong selling product, “Sit-ch Perfect”, in a better inventory position, and Otto directs his team to prioritize “Sit-ch Perfect” as the hero product in Q4 creative.

For Pricing, Otto sits down with Sofa So Good’s CFO, Reena Kleiner, to understand the implications of tariffs on 2025 margin goals, and what that means for pricing. They have held prices steady throughout the year despite the uncertainty, but they need to order additional inventory at tariffed rates to meet Q4 demand, and they know customers expect deep discounts during BFCM. The confluence of those two factors is putting pressure on the bottom line for 2025. As a result, Otto and Reena made the tough call to pre-emptively raise prices by 10% across the board starting in early September. This additional buffer will allow for continued comfortable profitability, even during the BFCM sale period.

Conclusion

Otto gets up from the sofa in Chase’s office and recaps it for the CEO: “There you have it Chase. We’re sure to crush this Q4 by: 1. Deeply understanding the ROI of our marketing spend; 2. Optimizing our spend mix based on that understanding; and 3. Making sure our tactical execution on product and pricing meets the moment. Then we’ll be able to recline our way into 2026.”

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